Wealth Distribution in the USA

Rahvin writes:What about other corporations int he same market who do pay more and remain in business? In and Out Burger, from what I understand, pays significantly better than minimum wage.

In fact, I've read recently that in some countries even McDonalds pays the equivalent of $14-24/hour.

Profit margin does not necessarily need to be lowered to increase wages. Re-structuring salaries in general - paying top-level CEOs and the like less, and increasing the wage of the average and/or lowest-paid employees - can result in an identical bottom line where labor cost is concerned.McDonald's CEO "earned" $8.75 million last year.

Straggler writes:Then, by the same law of supply and demand they would sell less and fail to meet their previous profit levels anyway. So now it becomes a question of determining which has the biggest hit on profits.

Think about this for a second. At the increased wage each employee still generates $95 of profit per hour. Less than the $100 per hour before the wage increase. But still a considerable profit per employee. Each employee they layoff saves $15 per hour in wages but loses $95 per hour in profits generated.

So why would any company seeking to maximise profits go down a route of raising prices, selling less and laying off workers if that results in losing even more profit than it would by just accepting the effect of wage increases if product price is maintained

Rahvin writes:...that would be why the majority of my post spoke of legislative regulation, not boardroom action. As I said, corporations are first beholden to the shareholders. Currently, the incentive exists to pay the lowest wages possible so as to keep the saved money as profit. Legislation can be passed that would alter that incentive such that lowering top-end pay, as a singular example, would provide more benefit to shareholders.

The beauty of capitalism lies in its power to drive innovation. The weakness of capitalism is exposed when that innovation turns to finding ways to exploit people and resources in ways that are beneficial for the individual company but harmful for the industry or society as a whole. Business will always go in the direction of cash incentives - whether that's avoiding tax penalties or paying workers below-subsistence wages. The trick is rigging those incentives to allow for innovation, to let new businesses form and keep older businesses around, without killing off the workforce, expending all available resources, or drying up the ability of consumers to consume what business is selling.

Straggler writes:I have suggested that increased costs due to raising the minimum wage could be accommodated by either accepting lower profits to shareholders or paying those at the top less. This has been dismissed as unrealistic. But the empirical evidence again suggests otherwise.

Straggler writes:The evidence I posted in Message 385 refutes the notion that an increase in wage of the sort being discussed will necessarily result in job cuts.

In a situation of high profits, low wages and and high dependency on low wage workers a moderate increase in minimum wage needn't result in job losses. Because any business strategy pursued in response to a minimum wage increase that involves significant job losses may well be self defeating. Significant job losses mean reduced operations and thus reduced profits.

So it is perfectly conceivable that simply taking the hit from the wage increase will have a less negative effect on profits than a strategy that involves less workers and a correspondingly decreased operation. Shareholders don't want to see profits fall. But they don't want to see companies contracting rather than growing either.

Anyway whatever theoretical model one applies - The evidence I posted in Message 385 refutes the notion that an increase in wage of the sort being discussed will necessarily result in job cuts.

NoNukes writes:If that happens across the econom the increase in wages has increased inflation. And increased inflation errodes the value of wages, so you go back to square one.
Aren't you making the same mistake you just identified? The 10 per cent increase in wages only caused a 3% increase in costs. How does that return you to square one?

Straggler writes:The evidence I was citing in Message 385 wasn't from Wiki. It was from the latest meta-analysis of all the relevant studies since 2000. Did you read it at all?Center For Economic And Policy Research - Why Does the Minimum Wage Have No Discernible Effect on Employment? John Schmitt Feb 2013

Discussion
Across all of the empirical research that has investigated the issue, minimum-wage increases are consistently associated with statistically significant and economically meaningful increases in the wages of affected workers. At the same time, what is striking about the preceding review of possible channels of adjustment — including employment — is how often the weight of the empirical evidence is either inconclusive (statistically insignificant or positive in some cases and negative in others) or suggestive of only small economic effects.One plausible explanation for these findings is that employers (and workers) respond on multiple fronts to any increase in the minimum wage. Individual establishments will follow different paths that depend on a complex set of circumstances that economists — operating with what is, even in the best of circumstances, a limited set of data — cannot fully capture or explain. Some employers may cut hours; others, fringe benefits; still others, the wages of highly paid workers. Some employers may raise prices (particularly if their competitors are experiencing similar cost increases in response to the minimum wage). Some employers may see their profits fall (along with those of their competitors), while others may reorganize the work process in order to lower costs. Some of the strongest evidence suggests that many employers may experience declines in costly turnover. And workers may respond to the higher wage by working harder. Any of these channels might be sufficient to eliminate the need for employment cuts or reduce the size of employment cuts to a level below where they can be reliably measured.
Employers and workers at the same establishment may follow more than one of these adjustment paths at the same time. Given the modest costs associated with historical increases in the minimum wage, it seems entirely plausible that small adjustments across a few of these margins could more than compensate for the higher wage floor.Some of these adjustment paths reduce the benefit of the minimum wage to affected workers (reductions in non-wage benefits or training), but most have an ambiguous effect (reductions in hours or increased work effort) or no effect (lower profits or wage compression within a firm) on the well-being of low-wage workers. And some adjustment channels arguably improve workers' well-being (lower turnover or increased consumer demand).The strongest evidence suggests that the most important channels of adjustment are: reductions in labor turnover; improvements in organizational efficiency; reductions in wages of higher earners ("wage compression"); and small price increases.

When you start a business, one of the decisions you have to make is whether to build things yourself or to buy them in.Software is one of those things that you can either make or buy — so long as you know how. Here at Voipfone we took a decision from the beginning to build all our core technologies ourselves, so it was interesting to hear an article on the radio about the Japanese electronics industry which once conquered the world, but is now almost defunct.Sharp and Panasonic are nearly bankrupt, Sony made a loss of $10bn last year and Hitachi has been forced out of consumer electronics and is attempting to make it in heavy industry. China and Korea are stealing their manufacturing and Silicon Valley is stealing their products.The Sony Walkman once created then dominated its sector but it was destroyed by the iPod. The difference between the two devices is that the Walkman is mechanical and contains no software whilst the iPod contains no clockwork and is all about being digital.But if you look at the economics of the IPod (and iPad and iPhone) you find that the manufacturer in China is keeping only about 3% of the profit whilst Apple is getting 50%+.In other words, the real value is being created and kept, in the USA from software development.Meanwhile, Korean Samsung is being extremely successful in both manufacture and development of digital devices from TVs to smartphones.Without a massive and wholesale switch from manufacture to software and hardware design, it’s hard to see how the Japanese can climb out of their hole — and it’s also a warning to China that depending on manufacturing alone, is not a great long-term plan.Meanwhile, here in the UK we need to be spending more time teaching real IT skills to our kids — companies like Voipfone need them.

Straggler writes:Remember our striking truckers? Let's imagine that you are responsible for negotiating the pay deal for those unionised workers. Do you think the fact that the economic impact of the truckers not undertaking that work results in losses that run into the millions might be relevant to your position in those negotiations? If you were the negotiator would you say "The number of people who can do the job that determines its value"....? Or would that stance be a dereliction of your duties as negotiator on behalf of the striking workers?In such a situation the economic benefit the workers provide, the value of their labour in terms of utility, is very much a relevant factor in wage negotiation and determination.

Straggler writes:I'm using the term "economic benefit" to describe the economic impact of the work in question not being done. That was the basis for my use of the term "economic benefit" when I was talking about the busniess case for a new network engineer position. That is the basis for my use of the term as applied to striking truckers.If you think there is a better term to describe the economic impact of the work in question not being done then I'd be happy to hear it.

Jon writes:I'm not talking about deciding wages. I'm talking about deciding whether to fill a position or not.
Do companies ever consider a job's impact on revenue when making this decision?

Percy writes:But aren't even sales jobs problematic? The way I see it, the revenue stream of a salesperson can be readily identified, but how much of that is his actual net contribution can't be known. The truckers, stock boys, warehousemen, cashiers, janitors, etc., also make their contributions which must be subtracted from the salesperson's, but since we can't quantify their contributions and can't know how much to subtract, we can't know the salesperson's contribution either. It seems to me that the revenue brought in by a salesperson is a good measure of performance, but it isn't a measure of his actual net contribution to revenue or profit.

Coyotee writes:And how does one make a profit that does not return to the economy?

Coyote writes:Those profits that go into tax shelters are the result of socialists and their nasty tax schemes that are designed to tax the productive and spread the proceeds among the non-productive. The golden goose parable comes to mind.

Coyote writes:Not just taking, but taking by force--at the barrel of a gun.